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Federal deficit down from last year
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CBC News- Ottawa ran a budget deficit of $3.3 billion in April and May, the government reported Friday, $1.1 billion less than the same period in 2010.
The federal Finance Department said the revenue shortfall was $400 million in April and $2.9 billion in May.
Revenue during the period, the first two months of the government's current fiscal year, increased by $1.1 billion, or 2.9 per cent. The government collected more in personal and corporate income tax, as well as Employment Insurance premiums, although it was partially offset by lower income from the goods and services tax.
Program spending was down $700 million, or two per cent, mainly reflecting lower transfer payments to the provinces and individuals.
Debt costs rise
The cost of servicing the national debt rose $700 million, reflecting inflation adjustments on the government's real return bonds and increased borrowing.
The government's fiscal update came the same day that Statistics Canada reported that real gross domestic product fell by 0.3 per cent in May, much worse than the 0.2 per cent gain that had been expected.
But TD Bank economist Sonya Gulati said Ottawa's cash cushion should be enough if growth slows.
"The government's approximate $1.4 billion planning reserve should help cushion the fiscal plan from any fluctuations in revenues and/or unexpected expenditures," she said in a commentary.
On Thursday, bond rating agency Moody's Investor Services reaffirmed Ottawa's top-tier triple-A credit rating, citing the country's economic resiliency and deficit control.
That contrasts with warnings that the impasse in Washington over cutting the U.S. deficit could mean a downgrade for the American government's debt.
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